Important Points to Remember
• Make sure you’re prepared for closing day — and have patience.
• Take all your paperwork to the closing table, including proof of insurance.
• What can go wrong? Lots of things. So do your research first.
The home inspections are complete. You have your homeowners insurance. The day you’ve been waiting for has arrived — closing day. If everything is in order, a closing process can run smoothly and ownership of the property will be transferred to you with no hitches.
Before the congratulations are given and house keys handed over the home buyer — you, and you will be expected to come to the closing table where you will be actively engaged and should be prepared to seal the deal.
Closing Day Prep — What to Expect at the Closing Table
The most important item a home buyer can bring to the closing table? Patience, says Walter Walker Jr., director of education for Housing and Education Alliance, a housing counseling agency in Tampa, Fla.
Walker warns buyers not to close on their lunch hour. An hour might not be enough. Rather, he says, take off a day or half-day.
He also recommends scheduling the closing date around the 20th or 25th day of the month, rather than the last day of the month, to allow time to address any last-minute problems.
“If something goes wrong, you’ll want to have at least a couple of days to attempt to resolve the problem that exists,” he says. “Also, everybody wants to close on the last day of the month. What happens if, for some reason, there’s a mechanical breakdown — the office printer breaks down and it’s 5 o’clock in the afternoon and your mortgage company is about to close?”
If a closing scheduled on the last day of the month is not completed that day, you will have increased closing costs, beginning at the start of the next month. That’s because prepaid interest due at closing accumulates throughout the month, but can be avoided or reduced if the closing is near the end of the month.
Buyers are often allowed to do a final walk-through inspection 24 hours before closing to determine if any damage was done to the property between contract and closing, and to negotiate any necessary repairs with the seller, says Mary Beth Rapice, a real estate attorney for the Pullman & Comley law firm in Bridgeport, Conn.
It is important for you to bring to the closing table every document received throughout the home buying process, Rapice says. These include the good faith estimate and proof of homeowners insurance.
“It’s always good to bring a copy of your contract, a copy of your inspection reports and any documents that you had delivered to the bank so that they could approve you for the mortgage,” Rapice says.
What happens on closing day?
While closing practices vary from state to state, even locality to locality, the following parties are generally present at the closing.
• Home seller.
• Seller’s real estate agent.
• Title company representative.
• Attorney(s): The buyer and lender may have attorneys.
• Closing agent: This person conducts the meeting and makes sure all documents are signed and fees and escrow payments paid.
• Mortgagor (you).
• Mortgagee (lender).
The home inspections are complete. You have your homeowners insurance. The day you’ve been waiting for has finally arrived — closing day.
When preparing for your closing day, don’t try to close on your lunch break — an hour may not be long enough. Instead, try scheduling the closing date around the 20th or 25th day of the month to allow time to address any last-minute problems. Home buyers are often allowed to do a final walk-through inspection 24 hours before closing to determine if any damage was done to the property between contract and closing, and to negotiate any necessary repairs with the seller.
During the closing meeting, the seller signs certain documents transferring property ownership and the home buyer receives and signs documents related to the mortgage agreement and ownership of the property, and pays any closing costs and escrow payments.
During the closing meeting, the seller signs certain documents transferring property ownership. You receive and sign documents related to the mortgage agreement and ownership of the property, and pay any closing costs and escrow payments.
These include:
• The HUD-1 settlement statement detailing all of the costs related to the home sale.
• Final Truth in Lending Act statement outlining the cost of the loan and annual percentage rate.
• Mortgage note stating the buyer’s promise to repay the loan.
• Mortgage or deed of trust securing the mortgage note.
“It’s very helpful for home buyers to be able to review all of the closing documents before they get to the closing table,” says David Adamo, CEO of Luxury Mortgage Corp., in Stamford, Conn. “This way, they are informed and prepared when it comes time to sign all of the closing documents.”
Whatever Can Go Wrong Often Does
Real estate attorney Neil Garfinkel offers a “closing nightmares” list: a lender pulling out at the last minute and not financing the property, a buyer not having enough money or a seller not clearing up property liens.
Failing to complete the final walk-through prior to closing is a significant issue as well. Garfinkel, a partner with Abrams Garfinkel Margolis Bergson in New York, says buyers have neglected to do final walk-throughs, but have asked the sellers to set aside money for any repairs. “That’s just a no-no; that’s not happening.”
Another action can cause problems at the closing table: when the buyer’s financial circumstances change. Opening a new credit account, securing a new auto loan or charging up an existing credit card can delay or even cancel your mortgage closing.
To lessen the chances of problems arising at closing, Rapice advises potential home buyers to research the entire home buying process with an attorney or mortgage lender.
“Understand what the total cost of the transaction will be to you. It’s not just the purchase price and attorney fees, there are a lot of other costs involved,” she says. “It’s more than what appears to the naked eye, it’s not just going and finding a house that you are in love with and deciding to buy it and deciding to get a mortgage.”

What Is Escrow?
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It is customary and prudent for a buyer and seller to have a third, disinterested party to assist them in carrying out the terms of their agreement. In California, this procedure is known as an escrow. When opening an escrow, the buyer and seller establish terms and conditions for the transfer of ownership of property. Your escrow is created shortly after you execute the contract to purchase your home. The escrow becomes the depository for all monies, instructions and documents. The Escrow Officer has the responsibility of seeing that all terms of the escrow are carried out.
NOTE: In some states, the process of completing the purchase of a home is known as the “Settlement” process. Often the seller and buyer will come together at the Settlement table where documents are signed and exchanged. There may be a settlement attorney who facilitates this process. In California, the term “Escrow” is used to describe the process of completing the sale of property.
How Does the Escrow Process Work?
The escrow holds all monies, instructions and documents for the purchase of your home, including your down payment funds and your lender’s funds and documents for the new loan. The escrow officer takes instructions based on the terms of your purchase agreement and your lender’s requirements. The escrow officer can hold inspection reports and bills for work performed as required by your purchase agreement. Other elements of the escrow include hazard insurance, title insurance and the grant deed from the seller to you. Escrow cannot be completed until the instructions (requirements) have been satisfied, and all parties have signed escrow documents.
The escrow holder’s duties include:
- Serve as the neutral agent and the liaison between all parties involved.
- Prepare the escrow instructions.
- Request a Preliminary Title Search to determine the status of title to the property.
- Comply with the lender’s requirements as specified on its instructions to escrow.
- Receive and handle purchase funds from the buyer.
- Prepare or secure the deed and documents related to the escrow.Prorate taxes, interest, insurance and rents.
- Secure releases of all contingencies or other conditions imposed on the escrow.
- Record the deed and any other documents.
- Request title insurance policy.
- Close the escrow pursuant to instructions supplied by the seller, buyer and lender, if any.
- Disburse funds as authorized by the instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs.
- Prepare final statements for all parties involved that account for the disposition of all funds held in the escrow account.
How Do I Open an Escrow?
Your real estate agent will open the escrow for you. As soon as you execute your purchase agreement, your deposit is given to the title company for deposit into the escrow account. How will you know where your money has gone? Written evidence of your deposit generally is included in your copy of your purchase contract. Your funds will then be deposited in your separate escrow or trust account and processed through your local bank.
Escrow Instructions
Escrow instructions define all the conditions that must occur before the transaction can be finalized. Your escrow instructions specify, in a debit and credit format, the disposition of your purchase funds. They also provide for title protection for your home.
What Information Will I Have to Provide?
You may be asked to complete a statement of identity. Because many people have the same name, the statement of identity is used to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is kept confidential.
How Long is the Escrow?
The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months. On average, it takes 30 to 45 days.
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0 What Is Escrow?
The Sale Process
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While there’s no such thing as a typical home sale — each has a character and a flow of its own – there are certain aspects you can expect. While local real estate practices may vary, here are the basic activities that occur during the transaction, from receiving an offer to closing escrow.

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0 The Sale Process
Your Responsibilities
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Your role during the escrow process should be an active one. Don’t wait for the seller to volunteer information — stay on top of it yourself and take reasonable care, along with me, your agent, to protect yourself.For example, when you review the Transfer and Disclosure Statement, TDS, keep an eye out for questions answered “unknown” or left unanswered. Ask about them until you are satisfied with the answers.
Let’s talk about your specific concerns or plans for the property. Concerned about the open parcel behind the house? Ask about it!
You may also wish to investigate the following non-physical conditions, including:
- Governmental zoning, requirements and limitations.
- Governmental permits, inspections or certificates.
- Limitations, restrictions and requirements affecting use of the property.
- Rent and occupancy control.
- Schools.
- Proximity and adequacy of law enforcement, crime statistics, proximity of registered sex offenders (see section on Megan’s Law) and other criminals.
- Proximity to fire, police and other services.
- Proximity to commercial, industry or agricultural activities.
- Existing and proposed transportation, construction and development, which may affect noise, view or traffic, airport noise, or odor.
- Wild and domestic animals, other nuisances, hazards or circumstances.
For Further Protection – Home Warranties: Home warranties have become a more popular option on homes for sale. For protection you may wish to have a home warranty that either you or the seller pays for. (It’s negotiable.) Warranties range in price from $300 – $600 and, for a fixed rate, generally cover limited aspects including plumbing, electrical, pest control and a host of other related areas. If you have a problem, generally you’ll pay $35-$50 to have a professional come out inspect and fix problems that are covered. Warranty agents typically are on hand 24 hours a day, 7 days a week to take your calls in emergencies.
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0 Your Responsibilities
Buyer Disclosures 101
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During the escrow process, you will be informed of specialized conditions that affect the home you wish to purchase. They may include the following:Lead Paint
Sellers of properties built prior to 1978 have the following obligations to you:
- Give you a HUD pamphlet entitled “Protect Your Family From Lead in Your Home.
- Disclose all known lead-based paint and related hazards and provide you with any available reports.
- Include a standardized warning as an attachment to the contract.
- Complete and sign statements verifying that requirements have been met.
- Retain the signed acknowledgement for 3 years.
- In addition, sellers must give you a 10-day opportunity to test for lead.
Natural Hazards
California law requires sellers to disclose to you, via a “Natural Hazard Disclosure Statement” or NHD, if properties are located in one of six predetermined “natural hazard” zones. (If the property is not within one of these zones, sellers, of course, have no such obligation.)The six zones are:
- A flood hazard zone as designated by the Federal Emergency Management Agency (FEMA).
- An area of potential flooding after a dam failure (also known as an inundation area).
- A very high fire hazard zone.A wild-land fire area, also known as a state fire responsibility area.
- An earthquake fault zone.
- A seismic hazard zone.
If an NHD is delivered to you after you signed the Purchase Agreement, you will have three days to rescind the agreement. However, if you receive the NHD before you signed the Purchase Agreement then you cannot use the NHD to rescind.
Mello-Roos Districts
Especially (but not exclusively) if you are buying a home in a newer area, you may be locating into a Mello-Roos tax district, and the seller must provide to you a “Notice of Special Tax” to let you know. If this notice is delivered to you in person, you have three days to rescind your offer. If it’s delivered via U.S. mail, you have five days to decide.
Basically, a “Mello-Roos Community Facilities District” is formed by a local government, district, or agency to finance public services and facilities including police and fire departments, ambulance and paramedic services, parks, schools, libraries, museums and cultural facilities.
Condominiums etc.
If you’re buying a condominium, townhouse or other planned development (for purposes of this discussion, we will call them all “condominiums”), there are things you need to know about common areas (such as greenbelts and recreational rooms) and the homeowner’s association.
You will be required to make monthly payments, known as regular assessments, to maintain common areas, as well as special assessments to replace a roof or repair the plumbing, as determined by the homeowner’s association (HOA.)
Condominiums also may have regulations regarding architectural requirements, limitations on pets, and age restrictions (i.e., senior housing). These must be formally disclosed to you during escrow. You may receive this information via the following documents, to the extent that they exist and are available:
- Declaration of Restrictions: Commonly known as “CC&Rs”, or Conditions, Covenants and Restrictions.
- Articles of Incorporation or Articles of Association Bylaws.
- All current financial information and related statements, including operating budget, estimated revenue and expenses, HOA reserves, estimated remaining life of major components (including roofs, plumbing etc.), and regular and special assessments.
- A statement describing the HOA’s policies and practices in enforcing lien rights or other legal remedies for default in payment of its assessments.
- A summary of the HOA’s property, general liability, and earthquake and flood insurance policies.
- On existing HOA’s, a statement describing any restrictions on the basis of age, such as authorized senior citizen housing.
Many smaller HOAs will not have all of these documents, but must provide what they do have. We recommend that you review these documents thoroughly, because they will affect you firsthand.
Megan’s Law
If a registered sex offender lives in the neighborhood in which you want to locate, you have the right to investigate – this is made possible due to a 1996 statute known as “Megan’s Law.” (Note that the seller does not have an obligation to provide this information to you.)
To investigate, you may:
- Log on to: http://caag.state.ca.us/megan/index.htm
- Call (900) 448-3000 to access the California Sex Offender Information Database. (There may be a charge to check names by telephone.)
- Call your local police department to locate a CD-ROM records viewing station.
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0 Buyer Disclosures 101
The Loan Process
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Step 1. The Application
The key to the loan process going smoothly is the initial application interview. At this time the loan officer obtains all pertinent information and documentation so unnecessary problems and delays may be avoided. This is the best time to discuss loan programs best suited to meet the home buyer’s needs.
Step 2. Automated Underwriting
After the application is completed, the loan officer inputs the application into the automatic underwriting system. This is an automated financial evaluation program that analyzes the data from the loan application of the borrower, such as income, credit history, debts, property details, debt-to-income rations, etc. This process evaluates the borrower’s financial picture and makes a credit decision. In conjunction with this review, the loan officer requests a credit report run on the borrower(s).
Step 3. Requesting Documentation
The next step after receiving the initial lending decision is that the loan officer will request certain documents such as bank statements, W2’s (2 years), verification of funds, landlord details and any other supporting documentation that has been requested.
Step 4. The Home buyer Enters into Contract on a Property
Step 5. Loan Submission
Once all of the necessary documentation has been acquired, the loan officer puts the loan package together and submits it to the underwriter for final approval. The final loan package includes the contract on the property, the property appraisal, preliminary title reports and any conditions that were identified in the automated underwriting process. The loan officer submits the final loan package to the underwriter for formal loan approval.
Step 6. Loan Approval
The underwriter reviews the contract, property appraisal and preliminary title reports and validates the conditions from the automated underwriting process. File disposition is achieved. Assuming all criteria are met, the loan is approved and/or other conditions may be requested as terms of funding.
Step 7. Rate Lock
The loan officer will discuss the loan programs available to the home buyer(s) in conjunction with discussing the final loan approval and conditions. Based on the outcome of the property purchase and final loan approval process, the buyer may wish to or need to review other loan programs. A final loan program decision is reached and the request for rate lock is made.
Step 8. Documents Are Drawn
After the loan approval, the loan documents (including the note and deed of trust) are completed and sent to the title company. The escrow officer calls the borrowers to come in when the papers are ready for final signature. At this time, the borrowers are told how much money they will need to bring in to close the loan.
Step 9. Funding
Once all the parties have signed the loan documents, they are returned to the lender, who reviews the package. If all of the forms have been properly executed, the funds are then transferred. At closing, the borrower must present a cashier’s check or arrange for a wire transfer of funds directly to the title company for the required closing costs and payments. No personal checks are accepted. Also, funding conditions must be submitted and satisfactorily met at this time.
Step 10. Recordation
When the title company receives the funding check from the lender, the title company makes the lender’s security for the loan a matter of public record. This is done by recording both the note and deed of trust at the County Recorder’s office. Escrow is now officially closed.
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0 The Loan Process
Closing Costs
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Below are some of the costs you may incur. Some are one-time fees, while others recur over the life of the loan. When you first apply for your loan, you will receive a Good Faith Estimate of Settlement Charges and a booklet explaining these costs, to minimize surprises. Generally, you can expect closing costs to equal from 3 to 6 percent of your mortgage loan amount. |
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Appraisal FeeThis is a one-time fee for an “appraisal,” a statement of property value required on most loans. An independent fee appraiser makes the appraisal. Unique and more expensive homes usually have a higher appraisal fee.
Credit Report Fee
This one-time fee covers the cost of your credit report, which is processed by an independent credit-reporting agency.
Document Preparation Fee
There may be a separate, one-time fee that covers preparation of the final loan papers, including the note and the deed of trust.
Loan Origination Fee
Often referred to as “points,” one point is equal to one percent of the mortgage loan. As a rule, if you are willing to pay more in points, you will get a lower interest rate. Anything in addition to one point is referred to as “discount points.”
Miscellaneous Title Charges
The Title Company will charge fees for a policy of title insurance and escrow services, which may include charges for document preparation, notary fees, recording fees and a settlement of closing fee. These are all one-time charges. Local custom by county will dictate whether buyer or seller pays all or a portion of these fees.
Private Mortgage Insurance (PMI) Premium
Depending on the amount of your down payment (generally less than 20%), you may be required to pay a fee for private mortgage insurance, which protects the lender against loss due to foreclosure. You may also be required to place funds into a special reserve account (called an impound account) for PMI, which will be held by the lender.
Prepaid Interest
Depending on the day of the month your loan closes, this charge may vary from a full month of interest to just a few days of interest. If your loan closes near the end of the month, you will have to pay only a few days of interest.
Taxes and Hazard Insurance
Based on the month you close, property taxes will be prorated between you and the seller. You may also be required to pay a full year’s hazard insurance (or homeowner’s insurance) premium in advance. In addition, you may also be required to place funds into a special reserve account (impound account) for taxes and insurance, which is held by the lender. You absolutely must have this to obtain a mortgage.
The “dwelling coverage” portion of your hazard insurance covers costs to completely rebuild your home, while the “liability coverage” protects you against accidents that occur on your property. “Personal Property Coverage” pays to replace your possessions and generally totals 50 to 75 percent of the dwelling coverage amount. Flood and earthquake insurance policies also are available and are recommended if you are in high-risk areas.
Title Insurance Fees
There are two title polices – a buyer’s policy, which protects the new homeowner, and a lender’s title policy that protects the lender against loss due to a defect in the title. These are both one-time fees. |
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CLOSING COSTS — Good Faith EstimateThe Good Faith Estimate of loan closing costs are made pursuant to the requirements of the Real Estate Settlement Procedures Act (RESPA). These are estimated settlement costs which the buyer will be responsible for in conjunction with the settlement of the mortgage loan. There are two general categories of closing costs, non-recurring and recurring. Non-recurring closing costs are items that are paid once, while recurring costs are items paid repeatedly over the life of the loan.
This is a detailed summary of costs you may have to pay when you buy or refinance your home. They are listed in the order in which they should appear on a Good Faith Estimate you obtain from your mortgage lender. Elements of the Good Faith Estimate are: (Costs will apply differently to each home buyer and are not particular in total to all home buyers) |
GOOD FAITH ESTIMATE
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Non-Recurring Closing Costs Associated with the Lender |
Non-Recurring Closing Costs not associated with the Lender |
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Loan Origination Fee
Loan Discount Fee
Appraisal Fee
Credit Report Fee
Lender’s Inspection Fee
Mortgage Broker Fee
Tax Service Fee
Flood Certification Fee
Flood Monitoring |
Closing/Escrow Fee
Title Insurance
Notary Fees
Recording Fees
Pest Inspection
Home Inspection
Home Warranty
Homeowner’s Association Transfer Fee |
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Other Lender Fees |
Reserves Deposited with the Lender |
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Document Preparation Fee
Underwriting Fee
Administration Fee
Appraisal Review Fee
Warehousing Fee
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Homeowners Insurance Impounds
Property Tax
Mortgage Insurance Impounds |
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Items Required to be Paid in Advance |
Refinancing Associated Costs |
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Prepaid Interest
Homeowner’s Insurance
VA Funding Fee
Up Front Mortgage Insurance Premium (UFMIP)
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Interest
Reconveyance Fee
Demand Fee
Sub-Escrow Fee
Loan Tie-In Fee
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EXPLANATION OF TERMS
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NON-RECURRING CLOSING COSTS ASSOCIATED WITH THE LENDER |
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Loan Origination FeeThe loan origination fee is often referred to as “points”. One point is equal to one percent of the mortgage loan. As a rule, if a borrower is willing to pay more in points, then the borrower will get a lower interest rate.
Loan Discount Fee
On a government loan, the loan origination fee is normally listed as one point or one percent of the loan. Any points in addition to the loan origination fee are called “discount points”. On a conventional loan, discount points are usually lumped in with the loan origination fee.
Appraisal Fee
Since the property serves as collateral for the mortgage, lenders want to be reasonably certain of the value and they require an appraisal. The appraisal is used to determine if the price you are paying for the home is justified by recent sales of comparable properties. The appraisal fee varies, depending on the value of the home and the difficulty involved in justifying value. Unique and more expensive homes usually have a higher appraisal fee. Appraisal fees on VA loans are higher than on conventional loans.
Credit Report Fee
As part of the underwriting review, the mortgage lender will want to review the borrower’s credit history. The cost varies depending upon the type of report requested.
Lender’s Inspection Fee
This is generally associated with new construction and is associated with what is called a 442 inspection. Since the property is not finished when the initial appraisal is completed, the 442 inspection verifies that construction is complete with carpeting and flooring installed.
Mortgage Broker Fee
About seventy percent of loans are originated through mortgage brokers and sometimes the points associated with the loan are listed here instead of under Loan Origination Fee. They may also add in any broker processing fees in this area. The purpose is to clearly indicate how much is being charged by the wholesale lender and how much is charged by the broker. Wholesale lenders offer lower costs/rates to mortgage brokers than you can obtain directly, so you are not paying “extra” by going through a mortgage broker.
Tax Service Fee
During the life of the loan the borrower makes monthly property tax payments, either on one’s own or through an impound account with the lender. Since property tax liens can sometimes take precedence over a first mortgage, it is in the lender’s interest to pay an independent service to monitor property tax payments.
Flood Certification Fee
The lender must determine whether or not the property is located in a federally designated flood zone. This fee is usually charged by an independent service to make that determination.
Flood Monitoring
From time to time flood zones are re-mapped. Some lenders charge this fee to maintain monitoring on whether this re-mapping affects the property. |
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NON-RECURRING CLOSING COSTS NOT ASSOCIATED WITH THE LENDER
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Closing/Escrow Fee
The fees associated with the closing.
Title Insurance
Title Insurance assures the homeowner that they have clear title to the property. The lender also requires it to insure that their new mortgage loan will be in first position.
Notary Fees
Most loan documents have multiple sets that must be notarized.
Recording Fees
Certain documents are recorded with the local County Recorder’s Office.
Pest Inspection
This is also referred to as Termite Inspection. This inspection tests for pest infestations and other items such as wood rot and water damage. If repairs are required, the amount to cover those repairs is usually covered by the seller, but it is a negotiable item. Usually the pest inspection fee is paid by the seller and is not normally reflected on the Good Faith Estimate.
Home Inspection
Since it is the home buyer’s choice to obtain a home inspection, this cost may not be reflected on the Good Faith Estimate. However, it is highly recommended.
Home Warranty
This is an optional item. A Home Warranty usually covers such items as the major appliances, should they break down within a specific time. Often this is paid by the seller.
Homeowner’s Association Transfer Fee
When buying a condominium or a home with a Homeowner’s Association, the association often charges a fee to transfer all of their ownership documents to the buyer.
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REFINANCING ASSOCIATED COSTS
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Interest
When closing the transaction on a refinance, there may be outstanding interest due on the old loan.
Reconveyance Fee
This fee is charged by the existing lender when they “reconvey” their collateral interest in the property back to the borrower through recording of a Reconveyance.
Demand Fee
The existing lender may charge a fee for calculating payoff figures.
Sub-Escrow Fee
This fee is actually charged by the Title Company.
Loan Tie-In Fee
This fee is charged by the Escrow Company.
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0 Closing Costs
Who Pays What
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A major question in every escrow is: “Who pays what?” The answers vary by county ordinances and standard practices. What is listed below are “customary” practices. All fees charged are governed by terms of the sales contract and other written escrow instructions. Note: on some FHA, VA or other government-backed loans, the buyer will pay some fees that governmental regulations will not allow you to pay. |
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Sellers Generally Pay |
Buyers Generally Pay |
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• Real estate commission.
• Document transfer tax ($1.10 per $1,000 of sales price).
• Notary fees.
• Property tax proration (to date of acquisition).
• Special delivery/courier fees, if required.
• Document preparation fees.
• Document recording charges.
• Homeowner’s association statement fee and prorata dues.
• Home warranty (according to contract).
• Work/repairs required (according to contract).
• Matters of record against the property or seller (loans, tax liens, judgments, etc.) and fees required to clear them (statement fees, reconveyance/trustee fees and prepayment penalties).
• Bonds and assessments (according to contract). |
• Title insurance policy premiums (lender’s and Buyer’s).
• Escrow fees.
• Notary fees.
• Property tax proration (from acquisition date).
• Special delivery/courier fees, if required.
• Document preparation fees.
• Document recording charges
• Homeowner’s association transfer fee and prorata dues.
• City costs.
• Home warranty (according to contract).
• Inspection fees (according to contract).
• Matters of record against the buyer. including tax liens, judgments and fees required to clear them.
• Fire insurance premium for the first year.
• Assumption/change of records fees if the buyer is taking over an existing loan.
• Lender’s new loan charges.
• Interest on new loan from date of funding to 30 days prior to the first payment.
Other prorations (rents, insurance etc.) if applicable. |
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0 Who Pays What
Closing Escrow
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After all of the contingencies have been removed or satisfied, your loan has been finally approved and documents have been drawn, you are now ready to close the escrow. Here are some of the things that you should think about in advance of closing.When do I sign escrow instructions and where do I do this?
Your escrow officer or myself will contact you to make an appointment for you to sign your escrow instructions and final loan papers. At this time, the escrow officer will also tell you the amount of money you will need (in addition to your loan funds). Your loan funds will be sent directly to the escrow by the lender. You may sign your escrow instructions and loan documents at a title company office, your real estate agent’s office or some other location agreed upon by all parties.
What should I look out for during the final walk-through?
Prior to your closing-day escrow appointment, if provided within the Purchase Agreement, you should have a chance to perform a walk-through with your agent. This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as the results of any work the seller has agreed to do in response to the inspection’s findings. Any problems discovered previously that you find uncorrected which the seller agreed to correct, should be brought up before closing.
Good Funds
In order for escrow to close, you must provide what is known as “Good Funds.” This means that escrow can close:
• On the same day as your deposit if the final down payment and closing funds are deposited by cash or electronic transfer (“wired funds”).
• On the next business day after the business day of the deposit, if the funds were deposited by cashier’s check, teller’s check or certified check.
• If the payment is made by personal or business check, when the deposit is made available for withdrawal by depositors. Depositing banks may hold these types of funds for up to three business days for most “local” items and up to seven business days for “non-local” items.
The Escrow Appointment
Once your loan is approved, you will be asked to go to the Title Company to sign the loan documents and escrow instructions that specify disposition of your loan funds. You will sign these documents in the presence of a notary public.
When you’ve signed everything, your lender will make one final review of the documents and conditions for closing. Once completed, the lender will send the loan funds to escrow. Often, lenders require three business days before the loan is funded. Below is a list of items you will need in preparation for the appointment to sign escrow papers:
• Identification — One of the following forms of identification must be presented at the signing of escrow in order for the signature to be notarized: a current driver’s license, passport, State of California Department of Motor Vehicles ID card.
• Cashier’s Check — You need a cashier’s check or a certified check issued by a California (or your state) or your financial institution made payable to the title company. If using a personal check, the title company may delay the closing until the check has cleared.
• Fire and Hazard Insurance — You must have fire and hazard insurance in place before the lender will send the money to fund the loan. Whenever you buy a home, you must have insurance. Provide your escrow officer with the insurance agent’s name and contact information so they can make sure that the policy complies with your lender’s requirements.
What’s the next step after I’ve completed my sign-off?
After you have signed all the necessary instructions and documents, the escrow officer will return them to the lender for a final review. Upon completion, the lender advises your escrow officer that the loan is ready to be funded.
What is an “escrow closing?”
Once all the conditions of the escrow have been satisfied, the escrow officer advises you of the date the escrow will close and takes cares of the technical and financial details. The culmination of the transaction, an escrow closing signifies legal transfer of title from the seller to you. Usually the Grant Deed and Deed of Trust are recorded within one working day of the escrow officer’s receipt of loan funds. This completes the transaction and signifies the “close of escrow.”
What do I get at closing?
Escrow will record the deed of trust, disperse the funds, provide both parties with a final financial accounting in the form of a settlement statement, and close the escrow.
Settlement Statement
• HUD-1 Form (itemized services provided and the fees charged; it is filled out by the closing agent and must be given to you at or before closing)
• Truth-in-Lending Statement
• Mortgage Note
• Mortgage or Deed of Trust
• Keys to your new home
What can I expect to happen on closing day?
You’ll be asked to present your paid homeowner’s insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable).
The seller will provide proofs of any inspection, warranties, etc. Once you’re sure you understand all the documentation, you’ll sign the mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.
You’ll pay the lender’s agent all closing costs and, in turn, the lender will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the County Recorder’s office. At that point, you officially will be a homeowner.
Disbursement of Funds Held in Escrow
In some cases, the escrow agent will be instructed to hold funds in escrow to pay off obligations, which may not be completed until after the close. For example, funds may be set aside to correct a structural problem, remodeling or termite repair work. Upon completion of the project, the escrow agent, having received proper documentation and releases will disperse the reserved funds.
When will I receive the deed?
The original deed to your home will be mailed directly to you at your new home by the County Recorder’s office. This usually takes several weeks and may take longer depending on regional activity.
After the close…
If the funds from the new loan are being used to pay off an existing loan (generally, if you are selling one property and buying another), the old lender is required by law to issue a full re-conveyance (release) of its loan. As soon as the deed of re-conveyance removing the previous deed of trust is received, it must be recorded and the original will be returned to you. This may take several weeks. However, this delay is normal, and is nothing to be concerned about.
Your lender may retain this loan in its own portfolio or may sell the loan to either a private or public agency, such as the Federal National Mortgage Association (Fannie Mae). In either case, you will receive specific instructions as to how to make your loan payments. |
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